Medical Marijuana Lawsuit Continues in Delaware

Posted:
Friday, September 5, 2014 4:41 PM EDT

DOVER, Del. (AP) - A Delaware judge on Friday refused to dismiss a lawsuit against a lobbyist and former aide to U.S. Sen. Tom Carper who was chosen to operate the state's first medical marijuana dispensary.

Vice Chancellor John Noble refused to dismiss a complaint against First State Compassion Center and Mark Lally that was filed by former Lewes city councilman A. Judson Bennett.

Bennett claims in the lawsuit that Lally, a former state trooper who later served as Carper's Sussex County director, breached an agreement to help Bennett seek a medical marijuana license and instead began working for a rival group.

State officials last month finalized a contract with First State to operate Delaware's medical marijuana dispensary. First State is linked to Massachusetts-based Sigal Consulting, which specializes in developing medical marijuana operations, including the Thomas C. Slater Compassion Center in Rhode Island, which opened last year.

It's unclear how Noble's ruling might affect plans to get Delaware's first medical marijuana "compassion center" up and running by the end of the year in an industrial park on the southern outskirts of Wilmington. Product sales to patients were to begin early next year.

Jill Fredel, a spokeswoman for the Department of Health and Social Services, had no immediate comment on the ruling. Fredel had said previously that officials considered the potential effect of the lawsuit but were satisfied that First State could continue to serve patients even if there were an "adverse result" in the case.

Bennett said he was elated by the ruling.

"We're going forward," said Bennett, who is seeking damages and an injunction preventing Lally from working for First State. "It's a big victory."

According to the contract signed with the state, Lally serves as president of First State Compassion Center, with Joel Allcock as senior vice president. Allcock has served as director of cultivation for the Rhode Island center. Jon Levine, co-founder and president of Sigal Consulting, signed the Delaware incorporation papers for FSCC.

Lally and his attorney did not immediately respond to a request for comment.

In his ruling, Noble said Lally and First State had failed to demonstrate that Lally did not owe a fiduciary duty to Bennett in light of their agreement and the work Lally had done for Bennett before he began working with Sigal.

"Thus, it is reasonably conceivable that plaintiffs reposed special trust in Lally or that Lally had a special duty to protect their interests," Noble wrote. "It follows that defendants' argument that First State cannot be liable for aiding and abetting because no fiduciary duties have been violated also fails."

Court documents indicate that Bennett hired Lally in 2011, agreeing to pay him $25,000 for one year and requiring him not to represent any "actual or potential" competing parties. Bennett and his business partner, Jeffrey Siskind, entered into a subsequent agreement with Lally in 2013. That agreement called for Lally to be paid $1,000 a month for at least six months, and for him to receive 10 percent of the net profits of any medical marijuana enterprise. It also required Lally "to refrain from assisting others in a similar enterprise unless and until Siskind and Bennett withdraw from pursuing said licensing ..."

Court records indicate that Lally began working with the Sigal group earlier this year after a failed attempt to establish a joint venture with Bennett.

Lally has argued that there was no contractual relationship between him and Bennett as of August 2013, because Bennett was no longer paying him. Nevertheless, Lally continued to hold himself out after that date as a representative of Delaware Compassionate Care Inc., the entity formed by Bennett, and to work with Bennett on trying to win the license.